By Peter Schroeder - 11/01/13 12:54 PM EDT
House Republicans are questioning whether ties between the Consumer Financial Protection Bureau (CFPB) and a research firm it gave a $5 million contract to could pose a conflict of interest.
A pair of top GOP lawmakers are asking the CFPB to explain how the behavioral economics firm, ideas42, came to receive the contract, and also flesh out the relationship between the firm and the agency, which includes a firm co-founder who went on to found the CFPB’s Office of Research.
House Financial Services Committee Chairman Jeb Hensarling (R-Texas) and his oversight deputy, Rep. Patrick McHenry (R-N.C.), said in a letter sent last month to CFPB Director Richard Cordray that such “intertwined” relationships “casts doubt upon the independence of the CFPB.”
According to the lawmakers, the CFPB and ideas42 have a number of close ties. Five of the six members of the CFPB’s Academic Research Council, which advises the bureau on research matters, have ties to the firm. One member is a co-founder of the group, another is an adviser, two are affiliates, and another presented before the CFPB at an event hosted by the firm.
Furthermore, lawmakers are probing the transition of one of the firm’s co-founders, Sendhil Mullainathan, from ideas42 to the CFPB, where was tapped by Sen. Elizabeth WarrenElizabeth WarrenThe Trail 2016: Drip, drip, drip... Clinton taps Warren ally to sit on transition team Warren leads 20 senators in letter grilling EpiPen maker MORE (D-Mass.) to head the bureau’s new research arm.
A Harvard economist, Mullainathan has since left the CFPB, but his role at the time included determining what topics to present before the council for input. The pair argue that having a former co-founder of a group soliciting input from a board with extensive ties to that same group “creates the appearance of a conflict of interest.”
At the heart of the lawmakers’ questions is the September 2012 contract, which they argued seemed “tailor-made” for the firm, and are asking for evidence that the contract was awarded in accordance with procurement policies. They asked the CFPB to provide all records tied to the handling of that contract, the formation and operation of the Academic Research Council, and anything else from the CFPB regarding ideas42.
McHenry previously asked Cordray about ideas42 during a September hearing. Cordray reportedly said he was sure the CFPB was acting in accordance with relevant rules, and would follow up in more detail.
A CFPB spokeswoman said the contract was awarded after a competitive, public bidding process, after weighing eight bids. Under the contract, ideas42 was to examine how consumers, especially older consumers, handle various financial challenges. The spokeswoman added that no members of the advisory council had input in that decision, and that Mullainathan was never paid by ideas42 for his role in creating it. He was not on the board when the contract was awarded.